Here’s How Economy Could Get A Boost: Be Like Apple

Research firm Capital Economics wonders whether the sluggish economy could get a boost if more companies followed in Apple’s footsteps and started paying dividends.

Plenty of attention has been paid to the billions of dollars piling up on company balance sheets these days. Profits have been strong, yet deal activity is way down and companies aren’t embarking on hiring sprees. Corporations are generally behaving cautiously, sitting on their cash and waiting for confirmation that the economy’s recovery is for real before putting their cash to use.

But if more companies started paying dividends, “the resulting boost to personal income and consumption could be significant,” writes Paul Ashworth, chief U.S. economist at Capital Economics. “Even if firms only paid out 10% of their liquid assets, that would be enough to boost annual disposable income by almost 2%.”

And he argues if much of that income was saved, annual consumption could still get a boost of about 1%, which would have a material effect on consumer spending and the overall economy.

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